Intermountain Health Care and PacifiCare will discontinue their Medicare HMOs because the companies lose millions of dollars insuring Utah senior citizens.
The companies announced Tuesday that they would halt their Medicare health maintenance organizations Dec. 31, leaving the state with no such program.There are 200,000 Utah seniors on Medicare. Only the 20,000 who participate in IHC and PacifiCare plans, called Secure Horizons, Senior Advantage and IHC Senior-Care, will be affected.
HMO enrollees can remain on the IHC and PacifiCare plans until Dec. 31 or disenroll at any time. They can return to traditional Medicare, which offers fewer benefits and costs more than the current plans, or enroll in a supplemental plan.
The change came as a surprise.
Joyce Smith, director of the Davis County Council on Aging, received a call from a woman in tears Wednesday morning.
The caller and her husband live on Social Security. On a fixed income, they didn't know how they will afford additional medical expenses on a plan with less coverage that what their HMO offers.
"For these people, it's so scary," Smith said.
Officials blame Utah's low reimbursement rate, the lowest in the country, for the insolvency of the companies' programs.
Medicare risk contracts, as they are called, are offered to providers on a flat per-county rate. Companies can keep any savings they see after the medical costs of an enrollee are realized. But if the medical care costs more than the flat rate, the company loses money.
Gene A. Smith, IHC director of government programs, said the company has lost $10 million on its 7,000 Medicare enrollees since June 1996.
PacifiCare spokesman Dee Brewer said his company lost $14 million with 13,500 enrollees in 1997.
Because HMOs are independent businesses, each can decide whether to contract with the federal Health Care Financing Administration. HCFA pays the monthly allotment in exchange for the HMO providing Medicare-covered services to beneficiaries. Utah's rate is $365 per person per month, well below the national average of $545. Even neighboring states like Nevada and Arizona have higher rates, $493 and $478, respectively.
Lt. Gov. Olene Walker, who co-chairs the state's Health Policy Commission, said Utah is being punished because it has historically been efficient in delivering medical services. Reimbursement rates are set by looking at health care costs over a five-year period.
"Other states have never put forth an effort to control costs, so those states that have been effective are punished," Walker said. "It's a lousy policy."
People currently on the HMOs will be eligible for traditional fee-for-service Medicare after Dec. 31. They can also purchase one of 10 supplemental plans, called Medigap.
In an agreement with IHC and PacifiCare, Regence BlueCross BlueShield of Utah will accept all Secure Horizons and IHC SeniorCare enrollees older than 65, regardless of pre-existing conditions or a waiting period. Those younger than 65 should talk to their current HMO plan managers about additional requirements.
Though there is a range in fees and covered services in the 10 supplemental plans, coverage for a plan similar to the existing HMOs will cost at least $25 more per person per month.
Donald J. Marik, HCFA regional office in Denver, said the companies have done all they can to ensure a painless transition. By federal law, they were only required to give enrollees 60 days' notice.
Smith said IHC is committed to leaving enrollees in a position no worse than if the HMO had never been offered.
The companies began notifying enrollees Monday. Secure Horizons enrollees can get more information by calling 1-800-377-4161. IHC SeniorCare enrollees can call 1-800-442-3126.